Welfarism Out of Control

IN HIS TELEVISION TALK of August 8 President Nixon announced a giant step deeper into the quagmire of the welfare state. _ What he proposed was the form of the guaranteed annual income known | as the negative income tax, plus a couple of additional gimmicks. He put forward this radical proposal in the language of conservatism. He said that the past third of a century had “produced a bureaucratic. mon- | strosity” and “left us a legacy of entrenched programs.” Then he proposed a plan that can only make the bureaucratic monstrosity more monstrous and create still bigger and more entrenched programs. He talked about a welfare quagmire with increasing caseloads and escalatIng costs. He expressed his alarm that “in the past eight years, three million © more people have been added to the _ welfare rolls.” And then he proposed a program that would cost no less than _ $4 billion in the first year alone (and _ perhaps even $10 billion), and would more than double the number of people eligible for public assistance— from a little under ten million to more than 22 million. What additional taxes would be ‘hecessary to pay this extra $4 billion to $10 billion was not stated. The President contented himself with the casual remark that the costs would not begin until the fiscal year 1971 “when I expect the funds to be available within the budget.” So nobody need Worry, even though Congress is now Proposing tax reductions for that and _ later years. Notwithstanding the tremendous i differences in prevailing incomes, wage levels and living-cost levels between tly and country districts, or between _ New York and Mississippi, a family of four with no outside income, no Matter what state it lives in, would re_ ive under the new plan a minimum federal payment of $1,600 a year. The States could supplement that amount. The same family could earn as much as $60 a month, or $720 a year, with no loss of benefits. Beyond that, aid would be reduced 50 cents for each dollar earned until the family’s income reached $3,920. There would be no “demeaning investigations.” Applicants would simply make declarations of need and begin receiving payments. The great safeguard, which is supposed to keep the nation from going into bankruptcy, is that the plan is to encourage—even force—people to work. Every recipient deemed employable would have to accept a job deemed suitable by the government or would have to undergo training. The long-term outlook for this pro- ‘gram is as follows: It is likely to be enacted more or less in the form President Nixon has proposed, and perhaps it will be a little bigger. The Republicans in Congress will vote for it as a matter of party regularity. The chief efforts of the Democrats, who represent the party of ever-bigger welfare handouts, will be devoted to trying to increase the benefits and decrease the safeguards. No sooner will the program have been enacted, than efforts will be made to enlarge it. We need merely look at the history of unemployment insurance and of Social Security, both of which were launched in the Thirties. Both — were originally enacted on the same argument as the new guaranteed-income proposal: they would make direct relief unnecessary and so displace it. But not only has direct relief multiplied steadily, despite growing prosperity, but unemployment insurance benefits have constantly grown bigger _ and longer, and Social Security benefits have been increased every one or two years (especially election years) and the coverage constantly widened. — So every year or two guaranteed income will grow. First of all, it will be © argued that a family of four cannot be. expected to live in decency and dig- — nity on a mere $1,600 a year. This is less than half of the present quasi-official poverty-line income. So the basic subsidy will gradually be pushed up to $3,200 or $3,500 a year, which means that the top combination of earned income and government benefit will move from $3,920 a year to — $8,000 or so. Next, few people on relief will be declared to be employable. Those who are will find very few jobs that they deem “suitable.” They may consent to take government-financed “training” programs, particularly if they are paid $30 a month for consenting, but many of them will merely go through the motions. In any case, the government- — administered programs will fall far short of the kind of training in neces- — . sary skills provided by the old-fashioned apprentice system in private industry. Most certain of all, the whole program of trying to force people to _ work for their benefit payments will soon be denounced as a sort of slavery. The work requirement will soon be quietly shelved. THE BURDEN OF TAXATION will stead-. ily be increased to pay for the rising benefits. The attempt will be made to place the increased burden mainly on corporations and the high individual incomes. This will further erode incentives and discourage the production upon which the welfare of all of wus depends. Government expenditures will continue to increase faster than the new tax revenues, bringing a return to chronic deficits, monetary inflation, and a further fall in the purchasing power of people’s insurance policies, pensions and savings deposits. It was not altogether auspicious that President Nixon’s announcement of his new guaranteed-income proposal was made on the evening of the same day that France was forced to announce another devaluation of the franc. Like policies, like results.

HH

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Henry Hazlitt

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IN HIS TELEVISION TALK of August 8 President Nixon announced a giant step deeper into the quagmire of the welfare state. _ What he proposed was the form of the guaranteed annual income known | as the negative income tax, plus a couple of additional gimmicks. He put forward this radical proposal in the language of conservatism. He said that the past third of a century had “produced a bureaucratic. mon- | strosity” and “left us a legacy of entrenched programs.” Then he proposed a plan that can only make the bureaucratic monstrosity more monstrous and create still bigger and more entrenched programs. He talked about a welfare quagmire with increasing caseloads and escalatIng costs. He expressed his alarm that “in the past eight years, three million © more people have been added to the _ welfare rolls.” And then he proposed a program that would cost no less than _ $4 billion in the first year alone (and _ perhaps even $10 billion), and would more than double the number of people eligible for public assistance— from a little under ten million to more than 22 million. What additional taxes would be ‘hecessary to pay this extra $4 billion to $10 billion was not stated. The President contented himself with the casual remark that the costs would not begin until the fiscal year 1971 “when I expect the funds to be available within the budget.” So nobody need Worry, even though Congress is now Proposing tax reductions for that and _ later years. Notwithstanding the tremendous i differences in prevailing incomes, wage levels and living-cost levels between tly and country districts, or between _ New York and Mississippi, a family of four with no outside income, no Matter what state it lives in, would re_ ive under the new plan a minimum federal payment of $1,600 a year. The States could supplement that amount. The same family could earn as much as $60 a month, or $720 a year, with no loss of benefits. Beyond that, aid would be reduced 50 cents for each dollar earned until the family’s income reached $3,920. There would be no “demeaning investigations.” Applicants would simply make declarations of need and begin receiving payments. The great safeguard, which is supposed to keep the nation from going into bankruptcy, is that the plan is to encourage—even force—people to work. Every recipient deemed employable would have to accept a job deemed suitable by the government or would have to undergo training. The long-term outlook for this pro- ‘gram is as follows: It is likely to be enacted more or less in the form President Nixon has proposed, and perhaps it will be a little bigger. The Republicans in Congress will vote for it as a matter of party regularity. The chief efforts of the Democrats, who represent the party of ever-bigger welfare handouts, will be devoted to trying to increase the benefits and decrease the safeguards. No sooner will the program have been enacted, than efforts will be made to enlarge it. We need merely look at the history of unemployment insurance and of Social Security, both of which were launched in the Thirties. Both — were originally enacted on the same argument as the new guaranteed-income proposal: they would make direct relief unnecessary and so displace it. But not only has direct relief multiplied steadily, despite growing prosperity, but unemployment insurance benefits have constantly grown bigger _ and longer, and Social Security benefits have been increased every one or two years (especially election years) and the coverage constantly widened. — So every year or two guaranteed income will grow. First of all, it will be © argued that a family of four cannot be. expected to live in decency and dig- — nity on a mere $1,600 a year. This is less than half of the present quasi-official poverty-line income. So the basic subsidy will gradually be pushed up to $3,200 or $3,500 a year, which means that the top combination of earned income and government benefit will move from $3,920 a year to — $8,000 or so. Next, few people on relief will be declared to be employable. Those who are will find very few jobs that they deem “suitable.” They may consent to take government-financed “training” programs, particularly if they are paid $30 a month for consenting, but many of them will merely go through the motions. In any case, the government- — administered programs will fall far short of the kind of training in neces- — . sary skills provided by the old-fashioned apprentice system in private industry. Most certain of all, the whole program of trying to force people to _ work for their benefit payments will soon be denounced as a sort of slavery. The work requirement will soon be quietly shelved. THE BURDEN OF TAXATION will stead-. ily be increased to pay for the rising benefits. The attempt will be made to place the increased burden mainly on corporations and the high individual incomes. This will further erode incentives and discourage the production upon which the welfare of all of wus depends. Government expenditures will continue to increase faster than the new tax revenues, bringing a return to chronic deficits, monetary inflation, and a further fall in the purchasing power of people’s insurance policies, pensions and savings deposits. It was not altogether auspicious that President Nixon’s announcement of his new guaranteed-income proposal was made on the evening of the same day that France was forced to announce another devaluation of the franc. Like policies, like results.